Deepening Ghana’s financial inclusion the cooperative way

Ghana, August, 26 2017 - The takeover of UT Bank and Capital Bank by GCB Bank came as a shock to some members of the banking community, making headlines in the newspapers of August 14 that reverberated beyond Ghana, but came as no surprise to key players in the local banking fraternity.

As far back as last year, some experts had predicted the fall of several banks in Ghana and the recent takeover by GCB could herald a major restructuring of Ghana’s banking sector. But since the main function of banks and other financial institutions is to hold deposits and grant credit to the public, the fall of a single financial institution is a loud call to action to protect depositors.

In the light of the above and past scandals involving microfinance companies such as DKM and God is Love, as well as ASN Financial Services, I looked at how cooperative credit unions promote financial inclusion and serve as a substitute to banks. Along the chain of financial service providers, it’s hard to find any example of a credit union in Ghana that has gone down with depositors’ funds.

Credit unions play a vital role in the nation’s efforts to deepen financial inclusion and above all provide a haven for individuals and groups to access credit at low interest rates compared with traditional banks and other finance houses. According to the African Center for Economic Transformation (ACET), accessing credit remains a major constraint to growth in Africa, though in a few African countries like Zambia, about 95% of SMEs have bank accounts.

Smallholders face all the systemic credit market biases against SMEs and more because amongst other things they are unable to offer their land as collateral when it’s acquired under any communal land tenure system. However, according to Mr. Daniel Adamba, a smallholder pineapple farmer and a member of a credit union, he was not required to offer land as collateral before being granted an agricultural loan of GH¢ 1,000 at a reasonably low interest rate to expand his pineapple farm.

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